Oil futures moved up sharply on Monday, looking to stretch their gain from last week, on expectations that talks toward restoring the Iran nuclear deal will drag on following the country’s presidential election late last week.
As was widely expected, hard-line judiciary chief Ebrahim Raisi won Iran’s presidential election on Friday after his strongest competitors were disqualified from the contest.
Raisi was sanctioned by the U.S. two years ago for his role in the mass execution of political prisoners in 1988 when he was deputy prosecutor in Tehran, according to Al Jazeera, which quoted him as saying that everything he’d done in his time in office was to defend human rights.
Top diplomats involved in talks between Iran and global powers attempting to restore the 2015 nuclear deal said Sunday that negotiations had made progress, the Associated Press reported.
But “the truth is the election of Raisi makes it almost impossible to get a deal done,” said Phil Flynn, senior market analyst at The Price Futures Group.
A restoration of the deal would add significant amounts of supply to the global oil market as early as the second half of this year, analysts have warned.
West Texas Intermediate crude for July delivery CLN21,
The July contract expires at the end of Tuesday’s session. The most-active August contract CLQ21,
August Brent crude BRN00,
The way the global demand is growing right now for oil and energy products, “perhaps if Iran’s oil does return to the market, it will be sorely needed,” Flynn said in his daily report.
“There are more concerns about global spare production capacity and because of the movement away from traditional fossil fuels, we have seen a historic drop in investment that is going to leave the world undersupplied,” he said.
In a note dated Sunday, analysts at BofA said Brent crude prices should average $68, but “ample” spare oil production capacity from OPEC+ — the Organization of the Petroleum Exporting Countries and their allies — along with a “likely” return of Iran barrels may “cap oil prices this year.”
At the same time, there is a combination of factors that could push Brent oil briefly to $100 next year, in part due to “plenty of pent up mobility demand after an 18-month lockdown,” they said. Demand is “poised to bounce back and supply may not fully keep up, placing OPEC in control of the oil market in 2022.”
Oil futures logged gains last week, despite a sharp selloff in other commodities tied in part to a surge higher by the U.S. dollar, which was lifted after the Federal Reserve signaled that policy makers expect rates to rise sooner than had been previously anticipated. A stronger dollar can be a negative for commodities priced in the currency, making them more expensive to users of other currencies.
Back on Nymex, July gasoline RBN21,
July natural gas NGN21,
